1.  Estate Tax, Filing Year 2018

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Three statistical tables containing estate tax return data for Filing Year 2018 are now available on SOI’s Tax Stats Web page. Due to the relatively long filing period, estate tax returns filed in a single calendar year may be for decedents who died in several different years. Table 1 contains data from estate tax returns filed in 2018, by tax status and size of gross estate. Table 2 includes data from estate tax returns filed in 2018, by State of residence. Table 3 includes data from estate tax returns filed in 2018 by gross charitable bequests and State of residence.

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  2.  Effect of IRC Section 965 Transition Tax on Domestic Corporations, Tax Year 2017

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Information on the overall effect of amended IRC section 965 on U.S. corporations is now available on SOI’s Tax Stats Web page. Data on the transition tax, from the inclusion of accumulated foreign earnings and profits from specified foreign corporations in taxable income per amended section 965, were compiled from Forms 1120, 1120-L, and 1120-PC filed by U.S. corporations.

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Tax Time Guide: Guard personal, financial and tax information year-round

WASHINGTON — The Internal Revenue Service today reminded taxpayers to remain vigilant with their personal information by securing computers and mobile phones. Proper cybersecurity protection and scam recognition can reduce the threat of identity theft inside and outside the tax system.

This news release is part of a series called the Tax Time Guide, a resource to help taxpayers file an accurate tax return. Additional help is available in Publication 17, Your Federal Income Tax.

The IRS doesn’t initiate contact with taxpayers by email, text messages or social media channels to request personal or financial information. People should be alert to scammers posing as the IRS to steal personal information. There are ways to know if it’s really the IRS calling or knocking on someone’s door.

The IRS also works with the Security Summit, a partnership with state tax agencies and the private-sector tax industry, to help protect taxpayer information and defend against identity theft. Taxpayers and tax professionals can take steps to help in this effort.

Below are a few tips to help minimize exposure to fraud and identity theft:

• Protect personal information.  Treat personal information like cash – don’t hand it out to just anyone. Social Security numbers, credit card numbers, bank and even utility account numbers can be used to help steal a person’s money or open new accounts.
• Avoid phishing scams.  The easiest way for criminals to steal sensitive data is simply to ask for it. IRS urges people to learn to recognize phishing emails, calls or texts that pose as familiar organizations such as banks, credit card companies or even the IRS. Keep sensitive data safe and:
  • Be aware that an unsolicited email with a request to download an attachment or click on a URL could appear to come from someone that you know like a friend, work colleague or tax professional if their email has been spoofed or compromised.
  • Don’t assume internet advertisements, pop-up ads or emails are from reputable companies. If an ad or offer looks too good to be true, take a moment to check out the company behind it.
  • Never download “security” software from a pop-up ad. A pervasive ploy is a pop-up ad that indicates it has detected a virus on the computer. Don’t fall for it. The download most likely will install some type of malware. Reputable security software companies do not advertise in this manner.
• Safeguard personal data. Provide a Social Security number, for example, only when necessary. Only offer personal information or conduct financial transactions on sites that have been verified as reputable, encrypted websites.
• Use strong passwords.  The longer the password, the tougher it is to crack. Use at least 10 characters; 12 is ideal for most home users. Mix letters, numbers and special characters. Try to be unpredictable – don’t use names, birthdates or common words. Don’t use the same password for many accounts and avoid sharing them. Keep passwords in a secure place or use password management software.

Set password and encryption protections for wireless networks. If a home or business Wi-Fi is unsecured, it allows any computer within range to access the wireless network and potentially steal information from connected devices. Whenever it is an option for a password-protected account, users also should opt for a multi-factor authentication process.

• Use security software.  An anti-virus program should provide protection from viruses, Trojans, spyware and adware. The IRS urges people, especially tax professionals, to use an anti-virus program and always keep it up to date.

Set security software to update automatically so it can be updated as threats emerge. Educate children and those with less online experience about the threats of opening suspicious web pages, emails or documents.

• Back up files.  No system is completely secure. Copy important files, including federal and state tax returns, onto removable discs or back-up drives and cloud storage. Store discs, drives and any paper copies in secure, locked locations.
• ID Theft Central. New on IRS.gov. Designed to improve online access to information on identity theft. Serves taxpayers, tax professionals and businesses.

Taxpayers can find answers to questions, forms and instructions and easy-to-use tools online at IRS.gov. They can use these resources to get help when it’s needed at home, at work or on the go.

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WASHINGTON — The Internal Revenue Service today advised that high-deductible health plans (HDHPs) can pay for 2019 Novel Coronavirus (COVID-19)-related testing and treatment, without jeopardizing their status. This also means that an individual with an HDHP that covers these costs may continue to contribute to a health savings account (HSA).   

In Notice 2020-15, posted today on IRS.gov, the IRS said that health plans that otherwise qualify as HDHPs will not lose that status merely because they cover the cost of testing for or treatment of COVID-19 before plan deductibles have been met. The IRS also noted that, as in the past, any vaccination costs continue to count as preventive care and can be paid for by an HDHP.

Today’s notice applies only to HSA-eligible HDHPs. Employees and other taxpayers in any other type of health plan with specific questions about their own plan and what it covers should contact their plan.

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Some popular tax benefits renewed for 2019; IRS Publication 17 Helps with 2019 Taxes

WASHINGTON ― The Internal Revenue Service reminds taxpayers that it is processing tax returns claiming benefits extended or changed by recent legislation. Most taxpayers can file when they are ready – and as they normally would – if they are eligible for one or more of these benefits and claim them on their 2019 federal tax return.

Taxpayers can get the most out of various tax benefits and get useful tips on preparing their 2019 federal income tax returns by consulting a free, comprehensive tax guide available on IRS.gov. Publication 17, Your Federal Income Tax, features an in-depth look at on tax changes for 2019 including recent legislative changes and covers the general rules for filing a federal income tax return. It supplements the information contained in the tax form instruction booklet. This 277-page guide – available online as a PDF, HTML or eBook − also provides thousands of interactive links to help taxpayers quickly get answers to their questions.

Certain individual tax provisions extended

• Deduction for above-the-line qualified tuition and related expenses claimed on Form 8917, Tuition and Fees Deduction
• Deduction for mortgage insurance premiums treated as qualified residence interest, claimed on Schedule A, Itemized Deductions
• Deduction for unreimbursed medical and dental expenses as the floor was lowered to 7.5% of adjusted gross income and claimed on Schedule A, Itemized Deductions
• Credit for nonbusiness energy property claimed on Form 5695, Residential Energy Credits
• Income exclusion for canceled debt for qualified principal residence indebtedness where the taxpayer defaulted on a mortgage that they took out to buy, build or substantially improve their main home claimed on Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness

Kiddie Tax modification

Recent legislation also modified the rules related to what’s commonly called the “Kiddie Tax” for certain children who may be able to calculate their tax based on the tax rate of the child’s parent. For tax year 2019, taxpayers can elect this alternative application for the tax on their unearned income by completing Form 8615, Tax for Certain Children Who Have Unearned Income, differently depending on their election. See the Form 8615 instructions for Part II Tax for more information. Taxpayers who make this election for 2019 must include a statement with their return specifying “election to modify tax of unearned income.” The statement can be made on the return (for example, on line 7 or at the top of Form 8615) or on an attachment filed with the return.

Disaster tax relief

Disaster tax relief was also enacted for those affected by certain Federally declared disasters. This includes an increased standard deduction based on qualified disaster losses and an election to use 2018 earned income to figure the 2019 earned income credit and additional child tax credit.

Certain taxpayers affected by federally declared disasters may be eligible for an automatic 60-Day extension for filing, paying their taxes, and other administrative deadlines.

Special rules may apply for taxpayers who received a distribution from an individual retirement arrangement, profit-sharing plan or retirement plan and their main home was in one of the federally declared disaster areas eligible for these special rules.

Amended returns

Three tax laws were enacted on Dec. 20, 2019. The Taxpayer Certainty and Disaster Tax Relief Act of 2019 extended certain previously expired tax benefits to 2018 and 2019 and provided tax relief for certain incidents federally declared as disasters in 2018 and 2019. The extended benefits and the disaster relief may now be claimed on 2018 and 2019 tax returns, by those who qualify.

The Setting Every Community Up for Retirement Enhancement Act of 2019 (the SECURE Act) made other changes, such as increasing the penalty for failing to file a tax return and modifying the rules related to the taxation of unearned income of certain minor children. The SECURE Act relaxed certain retirement plan contribution and distribution requirements beginning Jan. 1, 2020.

While the IRS has released the vast majority of tax year 2019 products, the IRS must also update 2018 tax products affected by these legislative changes. Taxpayers may have to file an amended return to claim these benefits on their 2018 return. See Form 1040-X, Amended U.S. Individual Income Tax Return, and its instructions at IRS.gov/Form1040X. Impacted 2018 forms, instructions and schedules are being revised to reflect the legislation enacted Dec. 20, 2019. The updated 2018 revisions will be posted to IRS.gov for taxpayers to file amended returns accurately.

The IRS works closely with tax professionals and partners in the tax return preparation and tax software industries to prepare for and address issues that may occur during the filing season. This ongoing collaboration ensures that taxpayers can continue to rely on the IRS, tax professionals and tax software programs when it’s time to file their returns. As always, filing electronically and choosing direct deposit is the fastest, most accurate and most convenient way to receive a tax refund.

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IRS updates guidance on business expense deductions for meals and entertainment

WASHINGTON — The Internal Revenue Service issued proposed regulations on the business expense deduction for meals and entertainment following changes made by the Tax Cuts and Jobs Act (TCJA).

The 2017 TCJA eliminated the deduction for any expenses related to activities generally considered entertainment, amusement or recreation. It also limited the deduction for expenses related to food and beverages provided by employers to their employees.

These proposed regulations address the elimination of the deduction for expenditures related to entertainment, amusement or recreation activities and provide guidance to determine whether an activity is considered to be entertainment. The proposed regulations also address the limitation on the deduction of food and beverage expenses.

The proposed regulations affect taxpayers who pay or incur expenses for meals or entertainment. These proposed regulations generally follow Notice 2018-76, issued on Oct. 15, 2018, which provided transitional guidance on the deductibility of expenses for certain business meals.

Taxpayers affected by this change and other interested parties may submit comments on the proposed regulations. The IRS will hold a public hearing on these proposed regulations on April 7, 2020.

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